Diversification needs imagination and real commitment

Alberta Premier Notley recently announced the creation of the “Premier’s Advisory Committee on the Economy.”

It replaced another advisory group called the Alberta Economic Development Authority, which I am sure in years past replaced other similar sounding consultative groups. They all have a long history in this province going back to the Lougheed days 40 years ago. The mandate and goal of all those groups has been to provide the premier with advice and recommendations on not surprisingly – how to diversify the Alberta economy. These groups usually come into prominence whenever energy prices crash and the provincial economy becomes depressed and government revenue craters. The recurring revelation is that a more diversified economy will lessen negative repercussions from the boom and bust cycle of oil prices – at least that’s the theory.

What has happened in the past is that governments presume that they can buy diversification by directly investing in shiny new ideas or giving money away to dubious schemes of one sort or another. The underlying force seems to be that they not be related to the energy industry. One recalls multi-million dollar government investments in Pacific Western Airlines, a magnesium plant, even a packing plant. It seemed at the time that the government was just trying to preserve exiting jobs rather than create new ones. There were some successes but ironically they were energy related. Premier Klein put an end to such grandiose sketchy investments but a later PC premier invested billions in the Northwest upgrader project. It’s all somewhat baffling as to what the rationale was for government investment in projects that private enterprise was unwilling to pursue. One hopes history will not repeat itself.

The Lougheed administration included agriculture as part of its diversification plan and set up support programs to increase production. They worked to an extent but there were also failures, the success was that it ended up developing consolidation of existing farming operations into much larger entities. From a job perspective, consolidation backfired as it saw existing small operators sell out and larger operations becoming more efficient and requiring fewer people. The big exception was the cattle feedlot sector which grew into a billion dollar business from almost nothing. That was achieved not as much by direct government investment but through low interest loans, a price stabilization program and a tax climate that encouraged private investment. One could say that it was still government investment just through different channels. I would add that the success of the feedlot sector was also due to the skill of a remarkable set of very clever and hardworking managers. If agriculture is going to be considered as a part of any new diversification effort by the present government, the development history of the feedlot sector would serve as a good example for potential success.

The problem with considering agriculture as part of economic diversification is that government and political strategists don’t consider that sector of the economy very sexy. One can’t help but note that not a single member of the new Premier’s Advisory Committee on the Economy has any connection to the agricultural sector, which is disconcerting, considering agriculture and food is the second largest industry in the provincial economy. One hears musings about high tech and green tech being the route to diversification – that’s a bit of a politically correct pipedream as almost every jurisdiction in North America also believes that’s the trail to diversifying their economies. One commentator suggested that a massive government investment into the arts and culture sector would make Alberta a hub for that activity. That sector already receives massive subsidies and is unlikely ever to be self-sustaining.

One senses that the hope of diversification is to support that magic bullet that will create tens of thousands of new non-energy related jobs. But that seems unlikely in a world that has fearsome competition in the economic development business between regions and countries. That leads one to wonder whether we should just concentrate and further develop what we do best. Unless Albertans are willing to work for five dollars an hour we will never have a major manufacturing sector, unless we subsidize high tech companies none are going to relocate here from Seattle and the Silicon Valley. The fact is Alberta is very good at coal mining, extracting oil, developing natural gas, processing trees, and oh yes, growing cereals, oilseeds, crops and raising livestock and poultry. It’s a lot cheaper and more productive to develop and expand what you already have than trying to buy something new and hope it will take root.